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Home Buyer Tax Credit Extended, Expanded & Enhanced!

Effective December 1, 2009

Its part of the HR 3548 Bill called Worker, Homeownership & Business Assistance Act of 2009-Section 11. Read the highlights—but always refer your clients back to their tax advisor for specific questions or unusual circumstances.

First-Time Homebuyers –

•  Tax Credit of $8000 or 10% of sales price.
•  Must be “principal residence”.
• Could not have owned a home within 3 years prior to the closing date of new purchase.

Long-Time Residents of Same Principal Residence –

• Tax credit of $6,500 or 10% of sales price.
• Must have owned home for 8 years and lived in that home consecutively for 5 years out of those 8 years.
• Current home must have been principal residence.

Special Rule for Members of Armed Forces –

• Member of “Uniformed” Services.
• Member of Foreign Service of the United States.
• Employee of Intelligence Community.
• Extended Duty defined as “Official Orders outside the United Stated for at least 90 days during the period 12-31-08 and May 1, 2010”.
• Tax Credit Dates Extended.

Important Dates:

• Sign a sales contract between December 1, 2009 and April 30, 2010 and close by June 30, 2010.
• Qualified Armed Forces – December 1, 2008 and April 20, 2011 and close by June 30, 2011.

Income Limits Increased:

• $125,000 Single
• $225,000 Married
• Modified Adjusted Gross Income (MAGI) – can earn up to $20,000 more than income limits and still get a partial tax credit.

Age Limit:

• 18 Years old on Date of Closing
• If married, and spouse is less than 18 years old, other spouse must be 18 years old

Maximum Sales Price

• $800,000

Proof of Purchase

• Copy of HUD 1 must be attached to IRS 5405 “First Time Homebuyer Credit” form.

Ineligible Home Buyers

• Non-resident aliens.
• If property disposed of before the end of the tax year.
• If property ceases to be principal residence before the end of the tax year.
• If property is acquired from a person who is “related” to the homebuyer or if married, the homebuyer spouse (this was added to the HR 3548).
• Income exceeds income limits (MAGI calculations).
• Less than 18 years old.

Pay Back of Tax Credit

• If home is sold within 36 months of acquisition, tax credit must be repaid in its entirety.

Type of Homes That Qualify

• Single Family
• 2-4 Family (one unit must be owner-occupied)
• Townhomes & Condos
• Houseboats
• Mobile & Modular Homes
• New Construction (Note – Date of land acquisition not address in extension provisions)

"The information provided has been based on rules and regulations issued by Federal Agencies and interpreted for you by MortgageCurrentcy.com. Interpretations are not guaranteed but we attempt to make them both easy to understand and help you sell more real estate. Check with your local and state authorities to ensure that you meet all requirements and disclosures."

Copyright © 2009 Reprinted with permission MortgageCurrentcy.com

Everything About Housing - Census Report Released

So what about that housing thing?  Well now you can find out.  Thus, no matter how trivial, important, or obscure the American Housing Survey covers it.  Like this, "I can't live without knowing, -" why a government researcher would inquire whether a home's toilet was inoperable for six hours or more in the last three months.  But I'm sure it's a must know factoid for someone.

If you must know all 642 pages of it, it is available in PDF format at http://www.census.gov/prod/2008pubs/h150-07.pdf .

I thought I would share some important items with you incase you're wondering. 

• - Of the approximately 128,000,000 reported housing units, 9,293,000 were in condo or coop developments and 8,705,000 were mobile or manufactured homes.
• - The median size of a housing unit is 1,769 square feet with owner occupied units running about 30 percent larger than rental units.
• - 24,885,000 or approximately 1/3 of owner-occupied homes are owned free and clear of mortgages.
• - 32,963,000 homes have a single mortgage while 11,741,000 carry two and there are three or more mortgages on 847,000 owner occupied homes.
• The median lot size occupied by single family houses is .35 acre.

If you would like to read the entire article, you can click here:  http://www.mortgagenewsdaily.com/10152008_housing_report.asp

If you have any question or would like to visit about the information or discuss what's going on in the Tulsa market please feel free to call me at 918-271-0062.

Brett Brough

Licensed Loan Planner

Oklahoma Number 1 in Home Price Appreciation

Here we are again at the top of the list.  The Office of Federal Housing Oversight (OFHEO) has placed Oklahoma at the top of the list in home price appreciation through the second quarter of this year according to OFHEO's seasonally-adjusted purchase-only house price index.  The index, which is based on data from home sales, was 1.4 percent lower on a seasonally-adjusted basis in the second quarter than in the first quarter (Nationwide).  This decline was less steep than the 1.7 percent decline in the prior quarter. Over the past year, prices fell 4.8 percent between the second quarter of 2007 and the second quarter of 2008. The decline is the largest in the purchase-only index's 17-year history, but is much smaller than those of other indexes. 

Here's the kicker Oklahoma's appreciation for one year was reported as 4.93%.   For those who care to read the release you can find it at this link > OFHEO.  Again for Oklahoma its the same good news / bad news.  This state has not had a real estate "bubble" and has only appreciated at around 4% for the last few years.  That's the bad news.  The good news:  We continue to appreciate at 4%.  Also it was reported locally in the Tulsa World, according to Realty Trac, US foreclosures were 1 in 464 households in July.  Oklahoma was 1 in 930 households or to make the comparison - about half of the nation wide rate. 

Misguided “Solutions”
Threaten Home Ownership

Although H.R. 3221 was intended to “rescue” the housing industry, the elimination of downpayment assistance (DPA) programs beginning October 1st will have the opposite effect, pulling the American Dream out of reach of hard-working, credit-worthy Americans and further crippling the American housing market.

Nearly 40% of all FHA loans are originated with DPA.
These Federal Housing Administration loans are not sub-prime. Without DPA programs, an estimated 50,000 families per month will be locked out of homeownership.

Targeting minorities, women-headed households, and first-time homeowners.
DPA participants are diverse. Of the participants in Nehemiah, the largest DPA program, nearly half are first-time homebuyers are people of color and more than one-third are female-headed households.

A perfect storm: removing assistance and raising the hurdle.
In addition to eliminating vital support for responsible homeownership, the misguided H.R. 3221 increases the downpayment requirement from 3 to 3.5 percent in an economy where stable, creditworthy families have less cash than ever.

You can find more information here:

http://www.dpagroundswell.org

To besure this is a mixed bag of fruit.  Borrowers that don't put money down have a higher default rate than borrowers who do.  So here's the issue, while it helps some home buyers acheive their desire to own a home, some will ultimately default on their loan, and at a higher percentage rate than those who do not use a down payment assistance program.  What happens next is when the lender has a default, here comes a foreclosure and the FHA gurantee kicks in (this is where the tax payer participates) and the lender receives a portion of the loan amount, less than that which is owed.  

The elimination of down payment assistance programs is an important change and you can consider what the elimination of 600,000 (annual number) buyers might mean to the market.  Does it mean there will be a better market for home sellers?  I doubt it.  You need to decide what might be in your best interest.  If you believe that a down payment assistance plan will help you buy a home, you might want to root for passage of this bill brining it back. 

As things stand now, according to Nehemiah Corporation of America, Sacramento, Calif., (Major provider of down payment assistnace) on October 1, 2008, 50,000 purchasers are off the market.

If you have any questions about what this may mean to you.  Please feel free to contact mel.

Brett Brough

Fed steps in and cuts again
Bernanke pulls out all the stops to ailing economy

The Federal Reserve significantly cut rates today for the sixth straight time since September. This follows a busy weekend where the Fed also extended its hand to Wall Street, bailing out Bear Stearns with JP Morgan Chase. While rate cuts look good at face value, you need to prepare for what's to come.

Why did they do this?
The Fed wants you to start spending money and wants to boost consumer and Wall Street confidence. Consumers are under stress with increasing consumer prices and a slowing housing market. Wall Street banks have been under stress from mortgage defaults and their impact on corporate balance sheets.

How does this impact you?
Fed rate cuts are inflationary. Since the Fed started cutting rates in September of last year, oil prices are up nearly 40%, gold prices are up over 25%. This is the direct result of a falling dollar which occurs from Fed rate cuts.

As a result, mortgage rates will ultimately rise from here. It is inevitable. Inflation is the arch enemy of fixed-income investments, long-term bonds and mortgage-backed securities, upon which mortgage rates are based.

Here's a look at the inflation picture: Gas prices last September, prior to the Fed's current cutting trend, were roughly $2.75 a gallon. Today, gasoline averages $3.25 a gallon nationally, up 18% before the first rate cut. This is a sign of inflation.

What should you do now?
If you are looking to refinance, don't wait. Act now to get a great interest rate. Home loan rates have come down over 1.00% in the last two weeks. But after each of the last five rate cuts, we have seen rates rise significantly in a short period of time. Don't get caught saying "I wish I had…"